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Milestone Planning in Building Power Plant
Case Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
Mohammad Effendi
Jakarta, 3rd March 2017
The rationale for “milestone planning”
Planning is the core of project management. Network planning is the pride of the project management profession. Most textbooks advocate that a network plan should be made at the start of the project.
However, network planning does not secure success. It is worth noting that many unsuccessful projects have very detailed plans.
This seems to contradict normal expectations. What's the explanation? Why is activity planning at the start of the project to be considered harmful? (Andersen, 1996).
The rationale for “milestone planning”
As implied by the definition of a project (“a unique endeavor”), it is doubtful whether project planners can foresee all the activities at the beginning of the project. This is especially true for totally new projects for the project planners.
Unsuccessful projects are characterized by rigorous attention to detailed planning, which may draw attention away from the more important issues in the planning process.
The main questions at the initial planning stage should be “what kinds of results the project should achieve”. The focus should be also on “in which order the results and the sub-results necessary for achieving the end results, should be delivered”.
What is a “milestone” ?
Milestone : In a reference to Project Management, a milestone is a special event that requires special attention. It is a significant event or stage in the progress or development of a project that we want to achieve.
A milestone anticipates what the project is supposed to achieve at a pre‐set date. It should describe a desired state of affairs, a desired future situation.
Milestones can add significant value to project scheduling. They help project managers to more accurately determine whether or not the project is on schedule.
Milestones are also control stations in the project, an opportunity for stakeholders to assure themselves that the project is moving in the right direction.
What is “milestone planning” ?
Having set and agreed the milestones with the key stakeholders … we can define milestone planning as the activities of preparation to achieve the agreed milestone(s) of a project by developing plans or activities to be performed and designating the responsibility for each of the activities.
The milestone plan charts the logical ties or dependencies between milestones. The milestone plan is not concerned with activities. Reaching a given milestone does involve, however, a number of activities.
In the focus of achieving the milestones … it would be sensible to have a detailed plan for every milestone. So after the milestone planning, there is also the need for activity planning.
6
34%
34%
32%
Guarantee Agreement
JBIC;9 Commercial Lenders
Project Finance
PPA; 25 Th; BOOT 25 th
• Adaro Indonesia;
• KPC
• MHPS• Sumitomo
Corp.
Coal Supply Agreement
EPC
Technical Service Agreement
Project SchemeCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
7
FIRST
PUBLIC‐PRIVATE PARTNERSIP (PPP) Project in Power Sector in Indonesia
Ultra‐Super Critical Technology Power Plant in Indonesia
IPP to implement Law No. 2/2012
IPP to implement BI Regulation for mandatory Rupiah payment
LARGEST
Power Plant Capacity (2 x 1,000 MW) in South East Asia
Project Investment ($ 4.2 Billion)
Project Financing Deal in Indonesia
Priority Project supported by KPPIP regulated under Coordinating Minister of Economics Decree No 12/2015
HIGHEST
AMDAL Standard for IPP Project
Environmental Social Management System Standard (IFC PS 2012, JBIC Guidelines, EP III)
Project DescriptionCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
Overall Project StagesCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
Milestone 1 Milestone 2(to be discussed more detail in
next pages)
Construction M3* Operation M4*
Handover
Milestone 1
• Obtain source of potential Project Financing• Obtain good and appropriate EPC Contractor• Obtain O&M Cost overview• Establish Feasible and Bankable Business Model • Bid preparation• Preparation for Special Project Company (SPC)
Note on M3:
• 48 months construction and COD for Unit 1• 54 months construction and COD for Unit2
Note on M4:
25 Years operation after which the project will be handed over to PLN, in line with concept of BOOT (Build, Own, Operate, Transfer)
Milestone 0
• Feasibility Study• Obtain Strategic Business Partner• Passed Pre‐Qualification
Milestone 0
For Discussion !!
RFP by PLNBid
Submission LoI PPA CODFinancial Close
Pre RFP
Milestone 2 – Original PlanCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
PPA Licenses 1Land
AcquisitionEPC Cost Refirm‐up
Milestone 2(Original Plan)
Financial Close
Milestone 2
• Licenses− Location Permit by Regency (Pemkab)− Environmental Permit by Province / AMDAL (Pemprov)
• Land Acquisition− 226 Ha for Power Block – all HGB certified− 34 Ha for Switchyard and 25 Tower Footings for Transmission Line – all HGB Certified
• EPC Cost Re‐Firm Up
• Loan Approval process− Review Business Model− Settlement of all Licenses, Agreement and Risk Mitigation (for Lender purpose)− Guarantee Agreement− Loan Signing
Oct 2011 Oct 2013
Loan ApprovalLicenses 2
Milestone 2 – Road Blocker and Recovery PlanCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
Road Blockers and issue
1. Lawsuit raised by NGO against Location Permit issued by Pemkab at PTUN
2. Rejection from Land Owners to sell their lands
3. Rejection from Daily and Tenant Farmer to forbid the relinquishment of village lands
4. BPI cannot continue the land acquisition process, although only 12.5 Ha remain unpurchased.
1. Multi Ministries approach to solve the land issues
2. Implementation of Law 2/2012 for remaining 12.5 Ha of land, including individual and village lands
3. Coordination with PLN & BPN as the executor of Law 2/2012 implementation
4. BPI need to review the project Milestone Planning
Land Acquisition Recovery Plan
1. New BI regulation that required to use IDR for local payment. While loan repayment to Lender itself is in USD
1. Multi Institution approach to solve the issue i.e• Kemenko Ekonomi, MoF, IIGF, BI,
Investment Board (BKPM)• PLN, Bank Mandiri• Lender and their legal counsel
Local Currency payment issue Recovery Plan
Milestone 2 – RecoveryCase Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
PPA Amendment
Location Determination Price Appraisal Socialization Musyawarah Consignment Certification
16th Feb 2015PPA Amendment No 4 for Law 2/2012 implementation by PLN for remaining lands
30th Jun 2015Issuance of Location Determination by CJ Governor No 590/35 2015
28th Aug 2015Construction Kick‐Off at site by President of RI, related Ministers and CJ Governor
8th Dec 2015Law no 2/2012 Land Handover from BPN to PLN
4th Nov 2015Lawsuit submittedto Administrative Court, against Location Determination
Dec 2015Administrative Court verdict rejecting Lawsuit against Location Determination
24 March 2015, visit President to Japan and signing MOU between :PLN – BPI ‐ JBIC
Court Verdicts
January 2014,DEADLOCK on Land AcquisitionBPI together with GoIto find solution and finally decided to apply Law no 2/2012 to acquire the remaining land
Project DEADLOCK Lawsuit
Milestone 2 – Recovery Case Study: Coal Fired Power Plant 2x1000 MW in Batang / Central Java
Financial Close
Jun 2016EPC
Refirm‐upCourt Verdicts Loan ApprovalSite Hand OverGuaranteeAgreement
BusinessModelReview
24th Feb 2016Supreme Court (MA) verdict rejecting Lawsuit against Location Determination
31st Mar 2016Site Hand Over from BPI to EPC Contractor
6th Jun 2016PPA Financial Close – signing of CP fulfillment by PLN and BPI
9th Jun 2016FC Ceremony at Presidential Palace of RI witnessed by President of RI
Documents & Other
Conditions Compliance